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Wasteland Capital
DeepSeekโs chatbot launched a year ago, and 90% of Wall Street research analysts told you to sell Semiconductors/Memory, and buy Software stocks.
If you did this, today youโre much poorer.
If you did the opposite, youโre killing it.
Their pigeon brains = Your opportunity. https://t.co/frorzVXo7M
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DeepSeekโs chatbot launched a year ago, and 90% of Wall Street research analysts told you to sell Semiconductors/Memory, and buy Software stocks.
If you did this, today youโre much poorer.
If you did the opposite, youโre killing it.
Their pigeon brains = Your opportunity. https://t.co/frorzVXo7M
๐ DeepSeek-R1 is here!
โก Performance on par with OpenAI-o1
๐ Fully open-source model & technical report
๐ MIT licensed: Distill & commercialize freely!
๐ Website & API are live now! Try DeepThink at https://t.co/v1TFy7LHNy today!
๐ 1/n https://t.co/7BlpWAPu6y tweet
Offshore
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Dimitry Nakhla | Babylon Capitalยฎ
RT @DimitryNakhla: ๐/๐ Chris Hohn just made $18.9B in a single year โ the largest hedge fund profit ever recorded
A thread of Chris Hohnโs best recent clips from the โMoney Maze Podcastโ โ organized by topic: competition, long-termism, barriers to entry, pricing power, disruption risk, & fads๐งต https://t.co/HjE9ptYz6q
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RT @DimitryNakhla: ๐/๐ Chris Hohn just made $18.9B in a single year โ the largest hedge fund profit ever recorded
A thread of Chris Hohnโs best recent clips from the โMoney Maze Podcastโ โ organized by topic: competition, long-termism, barriers to entry, pricing power, disruption risk, & fads๐งต https://t.co/HjE9ptYz6q
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memenodes
All this setup just to get liquidated when Trump says โtariffโ https://t.co/7SnJmaTkCl
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All this setup just to get liquidated when Trump says โtariffโ https://t.co/7SnJmaTkCl
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Offshore
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Dimitry Nakhla | Babylon Capitalยฎ
A quality valuation analysis on $MSFT ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 27.29x
โข3-Year Mean: 30.51x
โขNTM FCF Yield: 2.09%
โข3-Year Mean: 2.46%
As you can see, $MSFT appears to be trading below fair value on a forward earnings basis
Going forward, investors can expect to receive ~12% MORE in earnings per share & ~18% LESS in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $MSFT is a super business
BALANCE SHEETโ
โขCash & Equivalents: $102.01B
โขLong-Term Debt: $35.38B
$MSFT has an excellent balance sheet, an AAA S&P Credit Rating & 58x FFO Interest Coverage Ratio
RETURN ON CAPITALโ
โข2021: 31.1%
โข2022: 34.0%
โข2023: 30.9%
โข2024: 29.7%
โข2025: 28.0%
RETURN ON EQUITYโ
โข2021: 47.1%
โข2022: 47.2%
โข2023: 38.8%
โข2024: 37.1%
โข2025: 33.3%
$MSFT has strong return metrics, highlighting the financial efficiency of the business
REVENUEโ
โข2021: $168.09B
โข2026E: $326.83B
โขCAGR: 14.22%
FREE CASH FLOW๐*
โข2021: $56.12B
โข2026E: $75.05B
โขCAGR: 5.98%
*This is largely due to heavy AI-related reinvestment โ current 2028 FCF estimate $116.45B โ worth noting operating cash flow increases underscore $MSFT efficient AI infrastructure scaling validating high ROI-potential
NORMALIZED EPSโ
โข2021: $7.97
โข2026E: $16.26
โขCAGR: 15.32%
SHARE BUYBACKSโ
โข2016 Shares Outstanding: 8.01B
โขLTM Shares Outstanding: 7.46B
By reducing its shares outstanding ~7%, $MSFT increased its EPS by ~8% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 68.8%
โขLTM Operating Margins: 46.3%
โขLTM Net Income Margins: 35.7%
PAID DIVIDENDSโ
โข2015: $1.24
โข2025: $3.32
โขCAGR: 10.34%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~12% MORE in EPS & ~18% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $MSFT has to grow earnings at a 13.65% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2026 - 2028 EPS growth over the next few years to be more than the (13.65%) required growth rate:
2026E: $16.26 (19% YoY) *FY Jun
2027E: $18.75 (15% YoY)
2028E: $22.31 (19% YoY)
$MSFT has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $MSFT ends 2028 with $22.31 in EPS & see its CAGR potential assuming different multiples
30x P/E: $669๐ต โฆ ~17.9% CAGR
29x P/E: $647๐ต โฆ ~16.3% CAGR
28x P/E: $625๐ต โฆ ~14.7% CAGR
27x P/E: $602๐ต โฆ ~13.0% CAGR
26x P/E: $580๐ต โฆ ~11.3% CAGR
As you can see, weโd have to assume ~28x multiple for $MSFT to have attractive return potential
At 26x - 27x earnings $MSFT has ok CAGR potential
If $MSFT multiple expands slightly, >15% CAGR
$MSFT is one of the highest quality companies in the world & is firing on all cylinders
Today at $454๐ต $MSFT appears to be a strong consideration for investment with a decent margin of safety
$MSFT has large margin of safety at $420๐ต, where I can reasonably expect ~13% CAGR while assuming a more conservative 25x
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ
๐๐ก๐ข๐ฌ ๐๐จ๐ง๐ญ๐๐ง๐ญ ๐ข๐ฌ ๐ฉ๐ซ๐จ๐ฏ๐ข๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐๐ง๐ ๐๐๐ฎ๐๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐๐จ๐๐ฌ ๐ง๐จ๐ญ ๐๐จ๐ง๐ฌ๐ญ๐ข๐ญ๐ฎ๐ญ๐ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐, ๐๐ง ๐จ๐๐๐๐ซ, ๐จ๐ซ ๐ ๐ฌ๐จ๐ฅ๐ข๐๐ข๐ญ๐๐ญ๐ข๐จ๐ง ๐ญ๐จ ๐๐ฎ๐ฒ ๐จ๐ซ ๐ฌ๐๐ฅ๐ฅ ๐๐ง๐ฒ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ฒ.
๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐จ๐ฅ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐. ๐๐ง๐ฒ ๐จ๐ฉ๐ข๐ง๐ข๐จ๐ง๐ฌ ๐๐ฑ๐ฉ๐ซ๐๐ฌ๐ฌ๐๐ ๐๐ซ๐ ๐๐ฌ ๐จ๐ ๐ญ๐ก๐ ๐๐๐ญ๐ ๐จ๐ ๐ฉ๐ฎ๐๐ฅ๐ข๐๐๐ญ๐ข๐จ๐ง ๐๐ง๐ ๐ฌ๐ฎ๐๐ฃ๐๐๐ญ ๐ญ๐จ ๐๐ก๐๐ง๐ ๐ ๐ฐ๐ข๐ญ๐ก๐จ๐ฎ๐ญ ๐ง๐จ๐ญ๐ข๐๐.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐ ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐๐๐ฎ๐ซ๐๐๐ฒ ๐จ๐ซ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐๐จ๐๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๏ฟฝ[...]
A quality valuation analysis on $MSFT ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 27.29x
โข3-Year Mean: 30.51x
โขNTM FCF Yield: 2.09%
โข3-Year Mean: 2.46%
As you can see, $MSFT appears to be trading below fair value on a forward earnings basis
Going forward, investors can expect to receive ~12% MORE in earnings per share & ~18% LESS in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $MSFT is a super business
BALANCE SHEETโ
โขCash & Equivalents: $102.01B
โขLong-Term Debt: $35.38B
$MSFT has an excellent balance sheet, an AAA S&P Credit Rating & 58x FFO Interest Coverage Ratio
RETURN ON CAPITALโ
โข2021: 31.1%
โข2022: 34.0%
โข2023: 30.9%
โข2024: 29.7%
โข2025: 28.0%
RETURN ON EQUITYโ
โข2021: 47.1%
โข2022: 47.2%
โข2023: 38.8%
โข2024: 37.1%
โข2025: 33.3%
$MSFT has strong return metrics, highlighting the financial efficiency of the business
REVENUEโ
โข2021: $168.09B
โข2026E: $326.83B
โขCAGR: 14.22%
FREE CASH FLOW๐*
โข2021: $56.12B
โข2026E: $75.05B
โขCAGR: 5.98%
*This is largely due to heavy AI-related reinvestment โ current 2028 FCF estimate $116.45B โ worth noting operating cash flow increases underscore $MSFT efficient AI infrastructure scaling validating high ROI-potential
NORMALIZED EPSโ
โข2021: $7.97
โข2026E: $16.26
โขCAGR: 15.32%
SHARE BUYBACKSโ
โข2016 Shares Outstanding: 8.01B
โขLTM Shares Outstanding: 7.46B
By reducing its shares outstanding ~7%, $MSFT increased its EPS by ~8% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 68.8%
โขLTM Operating Margins: 46.3%
โขLTM Net Income Margins: 35.7%
PAID DIVIDENDSโ
โข2015: $1.24
โข2025: $3.32
โขCAGR: 10.34%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~12% MORE in EPS & ~18% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $MSFT has to grow earnings at a 13.65% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2026 - 2028 EPS growth over the next few years to be more than the (13.65%) required growth rate:
2026E: $16.26 (19% YoY) *FY Jun
2027E: $18.75 (15% YoY)
2028E: $22.31 (19% YoY)
$MSFT has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $MSFT ends 2028 with $22.31 in EPS & see its CAGR potential assuming different multiples
30x P/E: $669๐ต โฆ ~17.9% CAGR
29x P/E: $647๐ต โฆ ~16.3% CAGR
28x P/E: $625๐ต โฆ ~14.7% CAGR
27x P/E: $602๐ต โฆ ~13.0% CAGR
26x P/E: $580๐ต โฆ ~11.3% CAGR
As you can see, weโd have to assume ~28x multiple for $MSFT to have attractive return potential
At 26x - 27x earnings $MSFT has ok CAGR potential
If $MSFT multiple expands slightly, >15% CAGR
$MSFT is one of the highest quality companies in the world & is firing on all cylinders
Today at $454๐ต $MSFT appears to be a strong consideration for investment with a decent margin of safety
$MSFT has large margin of safety at $420๐ต, where I can reasonably expect ~13% CAGR while assuming a more conservative 25x
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ
๐๐ก๐ข๐ฌ ๐๐จ๐ง๐ญ๐๐ง๐ญ ๐ข๐ฌ ๐ฉ๐ซ๐จ๐ฏ๐ข๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐๐ง๐ ๐๐๐ฎ๐๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐๐จ๐๐ฌ ๐ง๐จ๐ญ ๐๐จ๐ง๐ฌ๐ญ๐ข๐ญ๐ฎ๐ญ๐ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐, ๐๐ง ๐จ๐๐๐๐ซ, ๐จ๐ซ ๐ ๐ฌ๐จ๐ฅ๐ข๐๐ข๐ญ๐๐ญ๐ข๐จ๐ง ๐ญ๐จ ๐๐ฎ๐ฒ ๐จ๐ซ ๐ฌ๐๐ฅ๐ฅ ๐๐ง๐ฒ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ฒ.
๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐จ๐ฅ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐. ๐๐ง๐ฒ ๐จ๐ฉ๐ข๐ง๐ข๐จ๐ง๐ฌ ๐๐ฑ๐ฉ๐ซ๐๐ฌ๐ฌ๐๐ ๐๐ซ๐ ๐๐ฌ ๐จ๐ ๐ญ๐ก๐ ๐๐๐ญ๐ ๐จ๐ ๐ฉ๐ฎ๐๐ฅ๐ข๐๐๐ญ๐ข๐จ๐ง ๐๐ง๐ ๐ฌ๐ฎ๐๐ฃ๐๐๐ญ ๐ญ๐จ ๐๐ก๐๐ง๐ ๐ ๐ฐ๐ข๐ญ๐ก๐จ๐ฎ๐ญ ๐ง๐จ๐ญ๐ข๐๐.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐ ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐๐๐ฎ๐ซ๐๐๐ฒ ๐จ๐ซ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐๐จ๐๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๏ฟฝ[...]